US and Israel celebrate 20 years of free trade

September 1st marks exactly 20 years since the signing of the United States-Israel Free Trade Area (FTA) agreement.Matthew Anci, an American acting student, used to play basketball regularly until one day on the court he noticed he was unusually tired: “I became out of breath and light-headed,” recalls the ordinarily healthy 25-year-old. “Thinking that I had the flu, I went about my daily routine until I suddenly became very pale and passed blood.”

Anci was rushed to the emergency room, where he was informed that he had lost half of the blood in his body. Doctors performed an emergency blood transfusion, yet after endless tests, they were still not able to pinpoint the source of the problem.

That’s when capsule endoscopy, developed by the Israeli company Given Imaging, was recommended. After swallowing an ingestible camera-in-a-capsule the size of a Tylenol pill, Anci was immediately diagnosed with Meckel’s diverticulum, an intestinal anomaly that occurs in 1 in 50 people, and often goes undiagnosed. Anci was treated and recovered.

The use of the Israeli-made Given Imaging capsule in the United States is one of the more salient examples of how a bilateral trade agreement has benefited the health and welfare of Americans.

September 1st marks exactly 20 years since the signing of the United States-Israel Free Trade Area (FTA) agreement – which was also the first free trade agreement the US signed with any country, and in that respect, an important – and successful – experiment. Today American-Israeli trade amounts to nearly $20 billion dollars, and if Jaffa oranges were once Israel’s classic export item, those fruit crates have largely given way to high-tech products. Many, like the Given capsule – which is paid for by the Blue Cross and Blue Shield insurance companies – have a direct benefit on American lives.

“The company offers one of the best new examples derived from the Israel/US free trade agreement,” says Sherwin Pomerantz, President of ATID Business Consulting. Pomerantz, who is also the trade and investment representative for seven US states including New Mexico, Georgia, Delaware and Pennsylvania, adds that much of today’s computer technology couldn’t be possible without Israel’s strong R&D capabilities and aggressive attitude in entrepreneurial activities.

“There is so much synergy in the thought processes which benefit both countries, making it is easy for Israel to create with and for the US market,” notes Pomeranz.

Israel, which is about the size of New Jersey, ranks 20th for exports to the US. Countries such as Mexico, Canada, China and France take the lead among the $725 billion worth of annual exports to the US.

But Israeli exports are on the rise. “Israel exported $12 billion worth of products in 2004 and in the last 9 months of 2005, [exports were] more than $10 billion,” notes Rafi Brender, Israel’s Deputy Director at the Foreign Trade Administration. Brender added that US Trade representative Robert Zoellick, on a visit to Israel last month, expressed his admiration over the dramatic increase in US-Israeli trade over the last 20 years.

While signing a free trade agreement with Morocco over the summer, Zoellick highlighted some of the benefits of trade: “Trade opens societies to the outside world and encourages development. It helps men and women to improve their lives today and build the future for their children tomorrow,” said Zoellick at the ceremony in Washington. “Trade helps to generate a middle class that can become an advocate for continued reform. The policies that foster economic freedom open the door for political freedom.”

Although Israel has somewhat friendly relations with Jordan, the country has not yet signed free trade agreements with any of its Arab neighbors, nor any other Muslim countries.

But Israel may have indirectly contributed to the signing of the agreement between the US and Morocco – as well as to other free trade pacts between the US and many other countries.

“Israel was the laboratory experiment for free trade before the US entered agreements with the NAFTA countries. The US didn’t want to sign something with its neighbors without making an experiment first,” explains Moshe Nachum Director of Foreign Trade and International Relations at the World Trade Center, Tel Aviv.

“If the US made mistakes [with Israel] they wouldn’t be severe because Israel’s economy is small vis-a-vis the US,” notes Nachum.

By 1985, the US was already one of the major markets of Israel. America, Europe and the rest of the world each occupied one-third of the Israeli export pie. At that time, negotiating a free trade agreement with the US was a natural step. The US-Israel agreement, which has no expiration date, provides for the elimination of duties for merchandise from Israel entering the United States and vice versa.

“The characteristics of our export basket have really changed over the years,” notes Nachum, “In the 1970’s the important export was agricultural products: oranges, tomatoes, celery, avocados, flour and processed food and some textiles and fertilizer products from the Dead Sea.”

Today, notes Nachum, the agricultural sector makes up less than 5 percent of Israel’s total exports while high tech products comprise around 60 percent; the remaining 35 percent are chemical products and plastics.

“Who has the better deal? When you have free trade, both countries devote their resources to maximizing utility. The one who is professional with oranges will send oranges and the one who is professional in cars will send cars,” notes Nachum. Both benefit, he says.